(Yicai Global) July 9 --  China's securities regulator has warned investors about 258 platforms illegally financing margin trading that may have helped to fuel this month's bull market in mainland stocks.

Some of these platforms are offering leverage of more than 10 times the trader's input, the China Securities Regulatory Commission said in a statement on its website yesterday, adding that the watchdog will punish them in accordance with the law, without specifying what that would entail. 

The mainland’s three major stock indexes have each soared more than 10 percent this month amid a strong economic recovery after the most trying times of the Covid-19 pandemic. The central bank has also stepped in to boost the banking system's liquidity.

The current situation may evoke painful memories of 2015 when China’s stock market bubble popped, causing major losses to investors, many of whom had borrowed from shady platforms to trade.

But the latest rally is different from that of 2014, according to Min Liangchao, chief macroeconomic strategist at HSBC Jintrust Fund Management. Leverage is relatively low and regulators have warned about the risks in time, Min told Yicai Global. 

China implemented a new securities law in March to only allow brokerages approved by the CSRC to lend for stock trading. In November, the Supreme People’s Court of China wrote in a document that those who participate in such borrowing or lending need to be ready to accept the risks and bear the consequences.

Editors: Dou Shicong, Emmi Laine